Equities: Iran risk drives sectors – Danske Bank

Danske Research Team observes that equities moved lower on US tech underperformance and a defensive rotation, though most sectors ended higher and VIX declined. They highlight continued weakness in Asian semiconductors after strong year-to-date gains, a constructive intraday turnaround in Europe, and note that Energy outperformed in both the US and Europe as Oil crept higher, underscoring Iran’s role as a key market driver.

Tech underperforms, energy outperforms

"Equity markets moved lower yesterday, driven by US tech underperformance and a clear defensive rotation. What is important, however, is that this was not a classic broad-based risk-off session. Most sectors were actually higher on the day, and VIX also declined. In other words, the move was more about sector rotation out of high-flying semiconductors than a general deterioration in risk appetite."

"We are seeing some of that same dynamic continue in Asia this morning. Taiwan and South Korea are notably weaker after what has been truly exceptional year to date gains, with the semiconductor complex underperforming after the pressure seen in the US yesterday."

"It is also worth highlighting the turnaround we saw in Europe yesterday. Markets started the day in the red but managed to close higher, which is a constructive signal in a session otherwise dominated by pressure on the most crowded parts of the equity market."

"This morning, Asian markets are mixed. European futures are higher, while US futures are lower, again with tech somewhat under pressure."

"Energy was the best performing sector in both the US and Europe, as oil crept higher. Hence, this also signals Iran remains one of the biggest daily drivers for markets at the moment."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)